Two of the largest less-than-truckload (LTL) carriers in the United States posted results this past week that fell below Wall Street expectations. Trucking companies are often seen as a barometer of broader economic activity since they carry a wide array of goods.
ArcBest Corporation reported an increase in revenue of about 4.8% versus last years first quarter, but nevertheless saw a wider loss this year. The LTL division of the company posted revenue that was higher by 4.9% to $464 million. The remaining divisions of ArcBest are involved in logistics, household moving, and roadside maintenance. The LTL division has been reacting to changes in shipping patterns, particularly a larger number of lower weighing shipments, which mean more handling is required by dockworkers for an equivalent amount of tonnage.
With respect to first quarter, clearly we’ve more work to do to achieve the results we expect to see. At a high level the stock market posted some initial strong results as the new administration took over in Washington. But economy growth was inconsistent throughout the quarter. We’ve yet to see a pattern of solid sustainable activity on that front as the various statistics that we track remain somewhat volatile.
However, we’re cautiously optimistic when we see signs that the macro economy is improving. Consistent with recent quarters on the asset based side of our business we continue to see smaller weight for shipment, but increases in shipping counts. We are a trusted partner for customers that require residential deliveries and as a result we have seen tremendous growth in this area. Our goal is to provide value while more effectively managing our costs and we have a number of initiatives in progress to address that goal.
CEO Judy McReynolds told analysts on the company’s conference call:
“We view these customers and shipments as a great opportunity but one that requires as to continually adapt our services and shipment charges in order to offer a superior customer experience that results in acceptable profit margins for our company. On the ArcBest assets light-side a degree of weaker demand particularly in the truck load sector continued to weigh on results. We were pleased with the performance of our expedite offerings that our dedicated truck load and international service lines produced operating results that were below our expectations. Our asset light services provide a great opportunity for growth and improved profits and our sales force is focused on that opportunity.”
Fellow trucker YRC, also posted higher revenue but weaker profitability in the first quarter. CEO James Welch was somewhat more optimistic on the broader economy, saying,
“Economic indicators point to improving industrial production that we believe will ultimately translate to continued year-over-year increases in volume. It is also important that we continue to drive action in areas where we can improve operational efficiencies that contribute to improved financial results.”
Nevertheless, YRC suggested that pricing was a larger factor for them than was the case for ArcBest Copration and the company announced the elimination of 180 non-union positions.
Shares of YRC fell nearly 20% on Friday, while shares of ArcBest declined by 25%.
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